formalities – corporations

Question 1

pre-incorporation acts

general rule as to corporation liability for pre-incorporation acts

Answer 1

corporation generally not liable for pre-incorporation acts

Question 2

pre-incorporation acts

when is a corporation liable for pre-incorporation acts

Answer 2

if they ratify the agreement
* explicit –board adopts a resolution agreeing to be bound by agreement
* implied – conduct; accepting the benefits of the agreement

Question 3

formation

how is a de jure corporation formed

Answer 3

1. articles of incorporation
2. affidavit of acceptance of the corporation’s registered agent

both of these must be filed with the SOS

Question 4

formation

how is a de facto corporation formed

Answer 4

formed when there’s a good faith attempt to create a corporation, but there was some omission

the court may still treat the corporation as having been formed where the equities of a particular situation so merit

Question 5

formation

what must the articles of incorporation include

Answer 5

1. name of the corporation
2. number of shares the corporation is authorized to issue
3. street address of initial registered office, and if different, the street address of the initial principal office
4. the name and street address of the initial registered agent
5. the name and address of each incorporator

Question 6

formation

what is the effect of the articles of incorporation including a narrow business purpose

Answer 6

the corporation may not undertake activities unrelated to the purpose

Question 6

formation

what can the articles of incorporation include

Answer 6

other provisions relative to managing the business and regulating the affiars of the corporation

Question 6

formation

what happens after the articles are filed

Answer 6

the initial directors (or incorporators if no directors named) will hold an organizational meeting to adopt bylaws, elect officers, and transact other business

Question 7

formation

what can the articles of incorporation include

Answer 7

other provisions relative to managing the business and regulating the affiars of the corporation

Question 7

formation

what can the bylaws include

Answer 7

any provision for managing the corporation that is not inconsistent with law or the article of incorporation

Question 8

formation

how are bylaws adopted

Answer 8

adopted by directors, but can be modified or repealed by either directors or shareholders

Question 9

formation

what can the shareholders provide in relation to a bylaw

Answer 9

a particular bylaw adopted or amended by them may not be repealed or amended by the directors

Question 10

formation

what is required for any bylaw adopted

Answer 10

must be consistent with the articles

Question 11

stock certificates

who is required to issue stock certificates

Answer 11

business corporation are required to issue, unless the corporation is a participant in the Direct Registration System of the Depository Trust and Clearing Corporation or of a similar book-entry system used in the trading of shares of public corporations

Question 12

stock certificates

what is the consequence of failing to issue stock certificates

Answer 12

requirement is a duty imposed on the corporation – shareholders are not penalized if they don’t receive stock certificates

Question 13

stock certificates

what must be included on the stock certificate

Answer 13

1. the name of the corporation and that it is organized under the laws of this state
2. the name of the person to whom it’s issued
3. the number and class of shares and the designation of shares, if any, the certificate represents
4. the president and secretary’s signatures, or the signatures of two officers designated in the bylaws or by the directors

Question 14

proxies

what is the general rule as to proxies for directors

Answer 14

generally, directors must be physically present at a meeting to vote; to allow proxies, the articles must provide for it

Question 15

proxies

what are the limitations imposed on proxies for directors

Answer 15

1. director may only appoint a fellow board member as his/her proxy
2. proxy is only valid for one meeting (articles can provide for longer appointments, however)

Question 16

proxies

what is the general rules for proxies for shareholders

Answer 16

able to vote either in person or by proxy with no special authorization required

Question 17

proxies

who may the shareholders appoint as a proxy and what is the process

Answer 17

• can appoint any other person and are not limited to appointing fellow shareholders
• appoint in writing or electronic transmission by shareholder
• effective upon receipt by the individual authorized to tabulate votes

Question 18

proxies

are proxies revocable or irrevocable

Answer 18

• generally, revocable by shareholder and valid for 11 months from the date of granting (possible to alter both of these)
• to be irrevocable, the appointment form must conspicuously state that it is irrevocable, and the appointment is coupled with an interest

Question 19

proxies

how does a shareholder revoke their proxy designation

Answer 19

1. in writing
2. by shareholder’s presence at the meeting to vote for him/herself
3. by subsequent appointment of another proxy

Question 20

written consent

how do directors generally act at meetings

Answer 20

through actions taken

Question 21

written consent

how can directors take action through written agreement at a meeting

Answer 21

must unanimously be signed by the directors
* note: this requirement cannot be altered

Question 22

# written consent how do shareholders generally act at meetings

Answer 22

through votes taken

Question 23

# written consent how do shareholders act without a meeting

Answer 23

all shareholders entitled to vote on the matter must sign a written consent * **articles can include a provision reducing the unanimity requirement**

Question 24

# annual report if the corporations fail to file the annual report, what is the potential consequence

Answer 24

termination (*potentially*)

Question 25

# meetings how often must meetings be held

Answer 25

annually

Question 26

# meetings what is the shareholders' remedy for requesting an annual meeting

Answer 26

if no meeting is held for 18 months, any shareholder can demand that the secretary call for a meeting to be held at the registered office

Question 27

# meetings who may call for a meeting

Answer 27

any shareholder individually, but none of them are *required* to do so (unless the secretary is a shareholder)

Question 28

# meetings what are the notice requirements

Answer 28

* must be given at least **10 days** but not more than **60 days** before the date of the meeting * must contain the time, date, and place * if the meeting is a special meeting, then the purpose of the meeting must be included as well

Question 29

# meetings how do shareholders waive the notice requirement

Answer 29

* doing so in writing either before or after the meeting * merely showing up at the meeting and not objecting to lack of proper notice

Question 30

# meetings what are the requirements for rescheduling a meeting

Answer 30

same as those required to schedule a meeting; possible to avoid giving a second notice relative to a reschedueld meeting if the rescheduling happens at a meeting already convened

Question 31

# records what are the first four types of records the corporation must keep at its principal office

Answer 31

1. articles or restated articles of incorporation and all current amendments 2. bylaws or restated bylaws and all current amendments 3. resolutions adopted by the board creating one or more clases or series of shares, and fixing their relative rights, preferences, and limitations, if shares issued pursuant to those resolutions are outstanding 4. minutes of shareholders' meetings, and all actions taken by shareholders without a meeting for the last 3 years

Question 32

# records what are the second four types of records the corporation must keep at its principal office

Answer 32

5. all written communications to shareholders within the past 3 years (including financial statements) 6. a list of the names and business addresses of current directors and officers 7. most recent annual report delivered to SOS 8. any unanimous governance agreement in effect

Question 33

# veil piercing what does veil piercing allow

Answer 33

reach the personal assets of a shareholder, director, officer, etc.

Question 34

# veil piercing who generally can pierce the corporate veil

Answer 34

creditors

Question 35

# veil piercing what are the methods through which veil piercing is appropriate

Answer 35

1. commingling member and corporate funds 2. inadequate capitalization 3. failure to maintain a separate identity

Question 37

# formation what *can* the articles of incorporation include

Answer 37

other provisions relative to managing the business and regulating the affiars of the corporation